Building Digital Infrastructure: Key to unlocking economic growth and innovation

 

A farmer in rural Maharashtra video-calls an agri-tech expert to diagnose blight in his soybean crop. A Coimbatore factory boosts output by 30 per cent using artificial intelligence (AI)-driven robots. A student in Imphal attends a virtual chemistry lab in 4K clarity. These are not futuristic vignettes but everyday realities in India, where average data consumption has surged to 21.10 GB per user monthly (Telecom Regulatory Authority of India [TRAI], September 2024). Industry estimates suggest the adoption of new-age technologies such as internet of things (IoT), generative AI, and robotics will exacerbate the need for round-the-clock, pan-Indian digital connectivity over the next few years.

Data explosion demands robust infrastructure

This data deluge needs to be backed by a thriving digital infrastructure ecosystem. Digital infrastructure is not merely about creating standalone networks; it encompasses a connected system that includes elements such as fixed/cable infrastructure, mobile broadband (MBB), in-building solutions, small cells, optic fibre cables, public Wi-Fi, E-band, V-band, satellite communications (satcom), and digital public infrastructure. Reliable digital infrastructure pervades every sector of the economy.

This holistic approach underscores the spillover benefits of digital infrastructure, which extend to trade, exports, manufacturing, online services, and other pillars of the economy, opening up new revenue streams. According to studies, the digital economy contributes over 9 per cent to South Korea’s GDP, while in China, fixed broadband (FBB) drives 6-7 per cent of GDP growth. In India, the digital economy contributed 11.74 per cent of GDP in 2022-23. A study by the Indian Council for Research on International Economic Relations estimated that every 10 per cent rise in internet traffic corresponds to a 3.3 per cent GDP increase. For a growing nation like India, with its ambitious vision of becoming a $1 trillion digital economy by 2030, investments in scalable and holistic digital infrastructure are no longer optional.

The mobile miracle hits a wall

A major shortcoming in India’s digital infrastructure is the paucity of fibre broadband. Although India is a mobile-first nation with approximately 1,200 million mobile subscribers (TRAI), it lags behind its global counterparts in FBB penetration, broadband speeds, and tower fiberisation. India’s fixed broadband penetration languishes at 3 per cent, dwarfed by China’s 44.73 per cent and Japan’s 38.55 per cent. India’s fixed broadband subscription rate (3 per 100 people) is one-fifth the global average. Moreover, India’s minimum download speed of 2 Mbps is far below the US’s 100 Mbps, South Korea’s 100 Mbps and Japan’s 30 Mbps. Further, India’s current tower fiberisation rate of 44 per cent lags behind the National Broadband Mission’s goal of 70 per cent by 2025.

For the past four years, India’s mobile penetration has hovered around 81 per cent, stagnating despite significant untapped potential in fixed broadband. Optic fibre cables are not only more reliable but also offer massive bandwidth capacity at a fraction of MBB costs. Services such as high-definition (HD) video streaming require substantial bandwidth: standard definition (2-3 Mbps), 720p HD (5-10 Mbps), and ultra HD (25 Mbps). Delivering such speeds to every user is feasible only through fibre-based broadband.

However, challenges persist. Bureaucratic right-of-way (RoW) delays inflate costs by 40 per cent, while legacy policies favour mobile-first strategies. Progress is possible. Kerala slashed RoW approval timelines from six months to 15 days via centralised portals, and Rajasthan’s “plug-and-play” infrastructure model reduced deployment costs by 25 per cent. BharatNet’s Phase III – an initiative to connect 0.6 million villages – could be transformative if it leverages private sector agility alongside public funding.

Buildings: The nerve centres of digital connectivity

Another critical gap is inadequate in-building connectivity, as offices, malls, airports and residential complexes become epicentres of digital activity. Estimates by the Digital Infrastructure Providers Association indicate that 85 per cent of data traffic and 70 per cent of voice traffic originate from buildings. The quality of indoor connectivity is often subpar due to infrastructure gaps. As 4G and 5G technologies operate on higher frequency bands, their signals struggle to penetrate thick walls, resulting in poor user experiences. Improving in-building quality of service (QoS) is imperative to enhance customer experience and unlock the potential of India’s digital economy, next-generation technologies and higher spectrum frequencies.

Comprehensive in-building solutions – powered by optic fibre, small cells, high-speed broadband and Wi-Fi networks – can address this bottleneck. A layered approach ensures connectivity reaches every nook and corner of a building, requiring massive deployment of in-building solutions to enable seamless digital interactions. Key enablers include digital connectivity infrastructure providers, which reduce the capital requirements for telcos and accelerate roll-out. To ensure consumer choice, property managers must establish quality digital connectivity infrastructure (DCI) in their buildings, available to all service providers on a shared basis.

Regulatory framework and resource requirements

TRAI’s regulatory efforts, such as its October 2024 building rating regulation, promote competition among property managers and enhance consumer choice. Mandating digital readiness for building approvals – at par with electricity and water – would accelerate adoption, benefiting tenants with better services and property managers with higher rentals. TRAI’s QoS regulations emphasise augmenting wireless infrastructure in buildings, while the Department of Telecommunications (DoT) has amended the universal licensing conditions to bar exclusive agreements for public telecom networks, promoting neutral host platforms and competition.

Developing nationwide digital infrastructure requires heavy capital investment. Andhra Pradesh attracted Rs 20 billion via viability gap funding for fiberisation, and multilateral aid (for example, the Asian Development Bank’s Rs 250 million investment) expanded rural connectivity in Maharashtra and Odisha. Delhi’s first telecom infrastructure REIT, raising Rs 5 billion from pension funds, signals a growing institutional appetite for digital infrastructure investments.

The Infrastructure Provider Category 1 (IP-1) model successfully fostered passive infrastructure sharing (for example, telecom towers and fibre), reducing operator capex and expediting deployment. In August 2023, TRAI proposed a new licence category – the Digital Connectivity Infrastructure Provider (DCIP) – to create shared telecom infrastructure (active and passive). The New Telecommunications Act, 2023 differentiates service providers from network/infrastructure providers, and TRAI is finalising the terms for DCIP authorisation.

Of India’s 1,500 IP-1s, only a limited number of specialised DCIPs are expected to emerge, given their focus on designing, financing and managing shareable infrastructure. Maintaining DCIPs as a separate category ensures QoS compliance and avoids conflicts with service providers. Independent DCIP authorisation will attract new players to build infrastructure for emerging needs (for example, IBS, data centres and satellite stations). Competition must be encouraged to drive quality, innovation, affordability and speed. For debt-laden telcos, DCIPs could alleviate financial burdens while improving service offerings.

Concluding remarks

India’s transformation from a mere 2 per cent teledensity in 1995 to an impressive 85 per cent today, predominantly via mobile connectivity, marks a significant milestone in its technological advancement. However, the forthcoming phase necessitates a strategic emphasis on fibre broadband to further bridge connectivity disparities. Policymakers need to recognise digital infrastructure as an essential public utility, akin to water or electricity. This evolution calls for well-crafted policy interventions, including the introduction of building ratings for digital readiness and incentives for the adoption of neutral infrastructure sharing practices. Moreover, fostering partnerships between telecommunications companies and digital connectivity infrastructure providers with real estate developers to ensure buildings are pre-wired for future technologies is crucial. By promoting competitive practices, ensuring affordability and not compromising on quality, India can develop an inclusive and robust digital ecosystem poised for future demands.